Can Realty Income's Expansion Into New Sectors Fuel Future Growth?

Realty Income O, a leader in net lease real estate, is expanding beyond traditional U.S. retail into high-value sectors and international markets, strengthening its growth trajectory and defensive positioning. With more than 15,600 properties across eight countries, the REIT leverages scale, diversification, and disciplined underwriting to drive long-term value.

The company’s strategy emphasizes sectoral and geographic diversification. In recent years, Realty Income has entered gaming with a $1.7 billion acquisition of Encore Boston Harbor and a $650 million preferred equity investment in Bellagio Las Vegas. In data infrastructure, it committed $200 million via a joint venture with Digital Realty, gaining exposure to Northern Virginia’s data center hub.

International expansion is also a key. Since 2019, nearly 30% of sourced volume has come from international markets, mainly Europe, where public net lease REIT competition is limited. From 2020 to 2024, Realty Income sourced $335 billion in opportunities and acquired $31 billion through a selective, analytics-driven approach. Its global addressable market now stands at an estimated $14 trillion.

In first-quarter 2025, Realty Income invested $1.4 billion at a 7.5% cash yield, $893 million in Europe (7.0%) and $479 million in the United States (8.3%). It now expects full-year 2025 investments to total $4 billion.

With a 5% AFFO CAGR since 1996 and stable EBITDA margins, Realty Income’s platform offers a compelling mix of income stability and growth. Long leases, strong tenant credit, and a scalable capital base further support its global expansion strategy.

Where are Other Retail REITs Investing?

Simon Property Group SPG is revamping its portfolio with premium acquisitions and transformative redevelopments. It recently acquired Swire Properties’ stake in the retail and parking component at Brickell City Centre, which is a mixed-use property in Miami. SPG earlier owned a 25%, non-managing interest in the retail at Brickell City Centre and now has secured full ownership and operational control. The retail REIT also has ongoing expansion efforts across geographies through new anchors, big-box tenants, and restaurants.

Kimco Realty KIM is pursuing opportunistic investments to strengthen its portfolio. In first-quarter 2025, it acquired The Markets at Town Center in Jacksonville for $108 million and two shopping center fee interests for $24.2 million. The RPT acquisition boosted scale in key markets. For 2025, Kimco plans $100-$125 million in acquisitions and similar spending on redevelopment efforts.

O’s Price Performance, Valuation and Estimates

Shares of Realty Income have risen 7.9% year to date against the industry’s decline of 8.8%.

From a valuation standpoint, O trades at a forward 12-month price-to-FFO of 13.23, below the industry. It carries a Value Score of D.

The Zacks Consensus Estimate for O’s funds from operations (FFO) per share has been revised marginally upward over the past 30 days.

At present, Realty Income carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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